Lord Lawson considered combining national insurance and income tax in 1986, but ultimately decided not to do so. Photo: Alami/Brian Harris
Nigel Lawson, the former Tory chancellor, rejected combining income tax and national insurance over fears that pensioners would miss out, a newly emerged note said.
Lord Lawson said Margaret Thatcher in a “secret” policy note in According to a document published in 1986, the move “will create many losers, especially among older people.”
The memo resurfaced with the Labor Party focusing its political fire on Rishi Sunak and Jeremy Hunt's ambitions to end so-called “double taxation” ahead of Thursday's local elections.
Mr Hunt, the Chancellor, unveiled another cut to the National Insurance budget in March and then went further by indicating he wanted to get rid of the tax entirely.
No timetable , no deadlines. Tory provided more details on the implementation. Some cabinet ministers argue that it will need to be carried out in several parliaments.
But Labour, keen to reassure voters that it can be trusted with the public finances, is focusing on what it has described as an unfunded commitment to £46 billion in tax cuts.
The fact that the policy of combining the two taxes was once ruled out by Lord Lawson, the chancellor whose photograph of Mr Sunak once hung in his office, is striking. -catching.
The Tories have long questioned whether it is fair that the income people receive is often taxed twice: first through income tax and then through National Insurance.
Income tax is generally paid by all workers at different rates , with personal allowances allowing people on the lowest incomes to avoid paying tax. Pensioners, meanwhile, do not pay National Insurance contributions.
Lord Lawson considered merging the two taxes in 1986 but ultimately decided against it, partly because older Britons might suffer the most. .
Lord Lawson wrote in a note to Mrs Thatcher: “I see little practical benefit in moving in this direction; it would destroy the contribution principle and create many losers, especially among the elderly.”
A more detailed explanation of why he decided not to take this step was set out in a green paper published the same year on possible reforms of taxation of individuals.
One line in Lord Lawson's green book read: “[A]ggregate levy should be set at around 40 per cent to remain revenue neutral. Those with low earnings will generally benefit because the tax breaks will reduce their liability. But this will be at the expense of taxpayers whose income is currently exempt from employee NICs [national insurance contributions].
Another text reads: “The application of the new combined tax to all income will result in significant changes in the tax burden between different sections of society. Older taxpayers and other pensioners are likely to be the largest group to be affected as they do not currently pay NIC.”
Jonathan Ashworth, Labour's shadow treasurer-general, said: “From the day Jeremy Hunt announced this £46bn unfunded pledge, we have been warning that the only way the Tories could pay for it would be at the expense of Britain's pensioners , and now we have it confirmed in the words of Nigel Lawson himself.
“Discovered after 38 years, it is an unexploded bombshell that blows Rishi Sunak's case for merging income tax and national insurance to pieces, and if he wants to continue now When he plans the plan, he will have to explain why he is ignoring his hero's advice and instead asking pensioners to pay for the trip.”
The Tories have long accused the Labor Party of misrepresenting their proposal.
>< p>The Treasury and Downing Street say the idea of ending “double taxation” is a long-term ambition, not a specific short-term political commitment.
They also note that the National Insurance scheme has been cut the same as last year autumn statement and this spring's budget, with national borrowing also expected to fall over five years.
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